Wall Street’s Tom Narayan Says THIS is Bigger Than Auto
Tesla's Energy Sector Expected to Surpass Automotive Sector in Value by 2026, Driving Investment in AI and Battery Energy Storage
Questions to inspire discussion:
❓ What is RBC Capital's new price target for Tesla and what rating did they give?
RBC Capital's new price target for Tesla is $297, and they gave an outperform rating.
💬 According to Tom Narayan, why is Tesla's energy business forecasted to be worth more than the standalone auto business?
Tom Narayan forecasts that Tesla's energy business will be worth more than the standalone auto business because he believes it will be substantially more valuable, despite the inclusion of autonomous driving for FSD and Robotaxi in the car segment.
🤨 What is the significance of Tesla's battery storage facility tour according to RBC?
The significance of Tesla's battery storage facility tour, according to RBC, is that the unit may be worth substantially more than the company's standalone car business.
❓ How does Larry Goldberg describe the profitability of Tesla's energy business compared to the vehicle business?
Larry Goldberg describes the profitability of Tesla's energy business as a small percentage of the vehicle business in terms of revenue and an even smaller percentage in terms of profitability. However, he points out that there is three times as much profit in the Deferred profit margin of energy sales that will be earned over the next three to four years.
💬 What is the potential for revenue and profit expansion in Tesla's energy business according to Larry Goldberg?
Larry Goldberg believes that there is a massive potential for revenue and profit expansion in Tesla's energy business. He mentions that the deferred revenue represents the earnout that will be based on performance, which is not accounted for in the current year revenue. This could lead to a multifold expansion of revenue and a dramatic expansion of profitability, potentially reaching billions of dollars in revenue and tens of billions in profit.
🤨 Why does the speaker think energy storage is critical for data warehouses?
The speaker believes energy storage is critical for data warehouses because it is essential to support the compute power needed for data processing.
❓ Do you think Tesla will need to revise their production targets due to the increased need for training compute?
It is possible that Tesla may need to revise their production targets due to the increased need for training compute. The speaker mentioned that time will tell whether Tesla will have to recalculate their total battery component required and potentially revise upward their revenue production targets.
Key Highlights:
RBC analyst predicts Tesla's energy business value surpasses auto business, supporting bullish outlook.
Potential Revenue Growth Beyond Current Recognition
Significant deferred profit in Tesla's energy business expected to surpass the car business, requiring patience for realization.
Rapid expansion of energy infrastructure and battery usage to support growing compute power.
Prediction of significant growth in battery performance impacting auto industry by 2025.
Clips:
00:00💡 Tesla's energy business projected to surpass auto business in value, despite current lower revenue and profitability.
RBC Capital's Tom Narayan forecasts Tesla's energy business to be worth more than its auto business.
Tesla's energy storage production targets indicate significant growth potential.
Tesla's energy revenue in 2023 was $6 billion, a small percentage compared to auto revenue.
Despite lower current profitability, Tesla's energy business has substantial deferred profit margins.
06:18💡 Analysis of the potential revenue and profitability growth of a company in the energy sector.
Company's earnout based on performance not reflected in current year revenue.
Predicted massive expansion of revenue and profitability in the energy sector.
Anticipation of building multiple new factories to meet production targets.
Significant deferred profit yet to be recognized in financial statements.
Expectation of energy business surpassing automotive business in terms of value.
11:36💡 Tesla's increasing energy revenue and profit will drive massive investment in AI and battery energy storage.
Prediction of a Mega Pack Factory announcement in Europe this year.
Expectation of Tesla's capital investment scaling up to $15-20 billion in the coming years.
Importance of avoiding grid interconnects by converting natural gas into energy for large data centers.
Focus on AI research and battery energy storage to support data warehouses and computing power.
Anticipation of a significant expansion in battery implementation to meet growing energy demands.
Potential revision of Tesla's production targets to meet the increasing demand for batteries.
20:28 📈 Tesla's anticipated growth in battery revenue surpasses auto revenue by 2026.
Anticipated 15% battery revenue by end of 2025.
Projected explosion in auto revenue in 2026.
21:35🔋 Energy sector's potential revenue is underestimated, with implications for Tesla's future growth and market dominance.
Institutional analysts believe energy sector impact is already factored into stock price.
Valuations for energy are considered trivial, with potential for massive revenue generation.
Projected revenue from energy sector could reach hundreds of billions to a trillion dollars.
By end of 2025, energy sector could account for a significant portion of Tesla's business.
Elon Musk may focus on building energy factories alongside auto factories for future growth.
AI and data warehouses play a crucial role in Tesla's expansion plans.
